Wells v. AMERICAN EMPLOYERS'INS. CO. ( 1942 )

HOLMES, Circuit Judge.

These two appeals are from judgments of dismissal as to appellee in separate actions that arose in Louisiana out of a collision in that state of two automobiles. For a further statement of the issues, see the opinion of the District Court, which is reported in 43 F.Supp. 214.

The decisive question below and here was and is whether appellants have the right of direct action in Texas against appellee, the insurer. The court below held that they did not.

Under the law of Louisiana the injured party is not required to obtain a judgment against the insured before proceeding against the insurer, but has a right of action against the insurer in the first instance.¹ In Texas this is not true, it being held in that state, where the liability of the insurer to the person injured rests solely upon a contract of insurance, that the plaintiff must bring his action within the terms of the policy before he may recover.²

Federal jurisdiction in these cases rests solely upon diversity of citizenship, and we must follow the state law as we find it. So far as that law is substantive we are controlled by the statutes and decisions of Louisiana; so far as it is procedural we are guided by the law of Texas, since there is nothing to the contrary in the federal statutes or the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.

The court of the forum determines according to its own conflict-of-laws rule whether the question is one of substance or procedure, and, in so doing, will examine the entire transaction before it. This includes the statute of Louisiana creating the right against the insurer and its interpretation by the courts of that state. So guided and controlled, we hold that the right to sue the insurer directly is procedural, and that the law of the forum governs.³

The judgments appealed from are affirmed.

1 Gager v. Teche Transfer Co., La.App., 143 So. 62; Tuck v. Harmon, La.App., 151 So. 803; Act No. 55 of the Louisiana Legislature of 1930.

2 Kuntz v. Spence, Tex.Com.App., 67 S.W.2d 254; Grasso v. Cannon Ball Motor Co., 125 Tex. 154, 81 S.W.2d 482; Norton v. Caster, 125 Tex. 48, 81 S.W.2d 487; Moxon v. Ray, 125 Tex. 24, 81 S.W.2d 488; Thurman v. Chandler, 125 Tex. 34, 81 S.W.2d 489; American Fidelity Co. v. McClendon, Chief Justice, 125 Tex. 41, 81 S.W.2d 493.

3 Graham v. American Employers’ Insurance Co., La.App., 171 So. 471; McArthur v. Maryland Casualty Co., 184 Miss. 663, 186 So. 305, 120 A.L.R. 846; Oertel v. Williams, 214 Wis. 68, 251 N.W. 465; Restatement of the Law of Conflict of Laws, Sections 584, 585.